Help me spread the word on TechStars Seattle applications

TechStars is not about me, it's not about Founder's Co-op, it's not about the list of investors. TechStars is about making Seattle an awesome and supportive place to build very successful technology companies. 

TechStars is about creating community and supporting technology entrepreneurship in Seattle.  We hope you will join the effort in whatever way you can. Please blog, email, retweet and generally help spread the word that TechStars Seattle applications are open.

To apply to TechStars, click To apply to TechStars, click here.

How TechStars came to Seattle?

Below is the somewhat long story behind TechStars Seattle. I usually don't write long blog posts but I'm super excited about TechStars and applications for the Seattle program open today. A number of people have asked me the story behind TechStars coming to Seattle -- so here it is in its full detail.  You can apply for TechStars Seattle here and theschedule of important dates for the program are here.

I first contacted David Cohen in January 2008. At the time, I had just started working on Founder’s Co-op and wanted to speak with David about his experience with TechStars. I thought that TechStars was onto something and I wanted to learn from what David was doing and consider doing something similar in Seattle.

Chris DeVore, my partner at Founder's Co-op and I decided we didn't want to mimic a 3 month incubator in Seattle – in our opinion, TechStars and Y-combinator were both occupying that market space pretty well.  I opted to start Founder’s Co-op, a mentor driven seed fund.  When I spoke to David on the phone, he was kind enough to share some legal documents with me. Shortly after that call, I became a mentor of TechStars Boulder.

In January 2009, I learned that TechStars was expanding to Boston. I emailed David Cohen and Brad Feld and said that if they ever considered expanding to Seattle I would be interested in working with them.   David and Brad both encouraged me to spend more time in the summer at TechStars to get to know the program. They said that they were interested in exploring the possibility of working together.

In May 2009, I went to my 20th college reunion at Brown University in Providence RI. While I was back east, I stopped by at the Boston TechStars 2009 orientation. Turns out that Shawn Broderick, an old friend of mine from the 1990’s Boston technology scene, was the executive director.  Shawn asked me to speak to the incoming class of TechStar companies.  I did – and I’m not sure exactly what I said – but as I spoke I choked with emotion.  The weekend had already been a trip down memory lane for me – walking the campus at Brown already pre-disposed me to feeling nostalgic. But I wasn’t prepared for the raw energy emanating from the founders of the 10 Boston TechStars companies. I spoke to the founders of the 10 companies. I told them what it was like for me to start abuzz in 1996. I shed a few tears. I got into my car and called Brad Feld and Jerry Colonna – the venture capitalists who invest and bet on me in, abuzz technologies, my first company.  I decided then – that Seattle needed a program like this and that I wanted to run TechStars Seattle. Now, I just needed David Cohen to be willing to open TechStars in Seattle.

In the summer of 2009, I made another two trips to Boulder in an effort to get to know the TechStars program and David Cohen better. After the second trip, David said that he was very interested in opening TechStars Seattle but didn’t want to make a decision until October 2009.   He also wanted to get to know the early stage technology scene in Seattle better.  He went about meeting entrepreneurs and investors in Seattle and even came to a Founder's Co-op LP meeting.

By September 2009, David told me that he had pretty much decided to expand to Seattle but he wanted the community of entrepreneurs to drive the expansion of the program.

In early November 2009, there were a series of dinners in Seattle between Matt McIlwain, Greg Gottesman, Brad Feld, David Cohen, and myself. 

The next thing I knew --  in a 24 hour period Greg Gottesman and David Cohen both called and asked me if I’d be willing to run TechStars in Seattle alongside Founder’s Co-op, the seed stage fund I run with Chris DeVore… and I agreed. 

With the help of Greg Gottesman, I then approached the entrepreneur and venture capital community in Seattle and asked them to collaborate with us in supporting the launch of TechStars Seattle in August 2010. What happened was amazing! We received huge support from an amazing list of experienced entrepreneurs willing to act as mentors. In addition, nearly all the venture capitalists in the city elected to materially support Techstars Seattle !

The list of investors includes:

  • Jeff Bezos Investment Group
  • Divergent Venture Partners
  • Draper Associates
  • Founders Co-op
  • Foundry Group
  • Ignition Partners
  • Linden Rhoads (UW, center for technology commercialization
  • Madrona Venture Fund
  • Maveron Venture Capital
  • Montlake Capital
  • OVP
  • Rolling Bay Ventures (Geoff Entress)
  • Second Ave Partners
  • TechStars Central
  • Trilogy Equity Partners, LLC
  • Voyager Capital, LLC
  • Vulcan Capital(Paul Allen's group)
  • WRF Capital

Turns out, the Seattle startup scene has totally embraced TechStars….and I think that Seattle entrepreneur community is the big winner.  

That’s how TechStars came to Seattle.

Applications open for TechStars Seattle today :  March 23, 2010 and the program starts in Aug 2010. 

If you’re an early stage entrepreneur, you should consider applying here.


Why Founder's Co-op made a seed investment in Untitled Startup?



There's a simple thesis at play in this investment.   UntitledStartup is a great example of the following investment thesis:

i) People First

ii) Market Second

iii) Product Third

Oh and above all -- while you're doing all the above -- has a sense of lightness and fun.  I've spent the last 60+ days co-officing, contributing and collaborating with Damon Cortesi and Aviel Ginzburg (the "gentlemen" and I use the term loosely depicted in the photo below) as they've figured out what their startup was going to do.  The funny thing is -- I made the decision to invest and have invested and I still don't know exactly what it is they're going to do -- and neither do they. Now that may sound crazy -- stupid even. I don't think so.

Damon and Aviel currently embody the new way to build a startup. They are working hard to invite their early adopters into every aspect of the business -- in a kind of continuous collaborative innovation.  When you go to their site -- be sure to go to the backstage  tab. Why is this important? Well -- hopefully, it's going to accomplish the following:

i) Product Market Fit -- Getting feedback and dialogue from the marketplace in every aspect of the product development process increases the likelihood that what they build will serve people's needs

ii) Ensure early customer enthusiasm -- the first 10 and the first hundred customers of any product are always the hardest to attract and engage. The manner in which Untitled is conducting business,  hopefully brings UntitledStartup these first early critical customers.  Moreover,The customers of the US will view the product development as a process and thus will roll through the necessary bugs etc that inevitably occur in the release of a new product. Well that's the theory anyway. 

iii) PR and Buzz -- rising above the noise of all the other startups out there is HARD. Having a story and an angle and a sense of fun make accomplishing buzz a little bit easier. It doesn't guarantee it -- but it certainly doesn't hurt.  

I'm super excited to have made this investment and look forward to the unfolding story that all of you help write at UntitledStatup!

Using fortune cookies to woo investors

I received this photo as part of an email from an entrepreneur pitching me for investment.  Below are the contents of the email. Fortune_cookie

"I hope your 2010 is off to a great start! I had Chinese for lunch today -- they accidentally gave me the fortune cookie intended for you (photo attached).

Do you have time to catch up in the next couple weeks?"

He accomplished a number of things with this simple email:

  1. He made me smile
  2. He demonstrated that he knows how to stand out from the crowd of normal investment inquiries. I'm assuming he can use this same skill with customers. 
  3. From an emotional perspective, he is someone that I would likely enjoy working with and supporting.  A big part of early stage investing is connecting emotionally. 

NOTE: Please don't misinterpret this post and start sending me fortune cookies to my office. I actually don't like them. Theo's chocolates are great but I'll likely be on a diet and won't be able to eat them.  

Being right and wrong at the same time about Judy's Book

I received emails from 2 of my former investors this week.

Brad Feld wrote me:

Re: you were ahead of your time

It took Google a while but they finally built Judy’s Book.  At least the data side.


2) Chris Ackerley wrote me:

re: Google to scoop yelp

Click here.


Chris sent me an article from Fox news speculating that Yelp had $30MM in revenue and might be valued at $500MM.  If you heard that sound -- it was me swallowing hard or saying WTF.

This start up stuff isn't for the faint of heart -- and it's an easy game to play in the rear view mirror. I'm going to sleep on this one and write about some new lessons learned -- they just keep coming !!

TechStars is coming to Seattle 2010

I'm happy to publish the press release. I'm super excited about this!  I think this is a great thing for the Seattle Startup community!

TechStars Expands to Seattle

TechStars announced today that it will launch a Seattle program in the fall of 2010, with Seattle-based entrepreneur and investor Andy Sack as Executive Director.  TechStars is a mentorship-driven, three-month-long "startup boot camp" for software entrepreneurs that typically receives hundreds of applications for 10 spots.  The selected companies receive up to $18,000 in seed funding, three months of intensive mentorship from successful entrepreneurs and investors, and the opportunity to pitch to angel investors and venture capitalists at the end of the program.

Sack is already well-known on the local startup scene as co-founder and Managing Partner of Seattle-based seed fund Founders' Co-op, guest lecturer in entrepreneurship at the University of Washington's Foster School of Business, and host of the weekly tech meetup Seattle Open Coffee

"We believe that TechStars can energize the startup community in Seattle in a unique way," said Sack, who  had previously served as a TechStars mentor in Boulder and Boston.  "Having experienced it up close in Boulder and Boston, I am excited about working closely with first-time entrepreneurs and involving the entire community in building 10 new companies literally from the ground up, many of which have the potential to change the technology landscape in important ways." 

The leading venture investors in Seattle have committed their support and also will act as mentors to TechStars in Seattle, including Bezos Expeditions, Buerk Dale Victor, DFJ, Founder's Co-op, Ignition Partners, Madrona Venture Group, Maveron, OVP, Second Avenue Partners, Trilogy Partners, WRF Capital, Voyager Capital, and Vulcan Capital.  Boulder-based venture capital firm Foundry Group, the Director of The Center for Commercialization at the University of Washington, and many prominent angel investors also have committed to supporting the program financially and as mentors.   

"It's incredible to see the support TechStars has engendered from the venture and angel community in Seattle," said Greg Gottesman, Managing Director of Madrona and a mentor for TechStars.  "So many key investors and entrepreneurs have raised their hands and said we want to make this effort successful, and we're willing to put our time and resources behind it.  If community support is an indicator of where this program is headed, we literally could not have had a better start."

Mentors for TechStars Seattle include Alex Algard (White Pages), Rich Barton (Zillow), Adam Brotman (Starbucks), Adam Doppelt (UrbanSpoon), Marcelo Calbucci (Seattle 2.0), Chris DeVore (Founder’s Co-op), Geoff Entress (Voyager), Michelle Goldberg (Ignition), Greg Gottesman, Steve Hall (Vulcan), Steve Hirsch (Natural Village), Josh Hug (Shelfari), Ben Huh (Cheezeburger Holdings), Nathan Kaiser (nPost), Glenn Kelman (Redfin), Shane Kim (Microsoft), Dan Levitan (Maveron), Melinda Lewison (Zefram/Bezos Expeditions), Andy Liu (BuddyTV), Ethan Lowry (UrbanSpoon), Bill McAleer (Voyager), Jamie Miller (Blinkx), Josh Petersen (43 Things), TA McCann (Gist), Patrick O'Donnell (UrbanSpoon), Linden Rhoads (Center for Commercialization at the University of Washington), Dave Schapell (TeachStreet), Jonathan Sposato (Picnik), Katie Thompson (Trilogy), and many more.  The full list of TechStars mentors for the Seattle program as well as the national mentor list are available on the TechStars website.  

Applications for the Seattle program will open in May. You can learn more about TechStars at

About TechStars

TechStars was founded in 2007 by Boulder-based serial entrepreneur-turned-investor David Cohen and venture capitalist Brad Feld. TechStars has operated in Boulder for three years and in Boston for one year.  Since inception, TechStars has supported 39 companies and approximately 75% have subsequently received follow-on financing from outside investors. Several companies that have emerged from TechStars have already successfully exited to notable acquirers such as AOL and Automattic (WordPress). The most recent batch of companies resulted in seven VC-led follow-on funding rounds and three additional angel-led rounds. TechStars companies attract the attention of seed-stage investors nationally.








My new rule of thumb for entrepreneurs: Divide by 3

If a year ago, an entrepreneur was hoping to raise 3 million at a 6MM pre-money valuation.  Today, that very same entrepreneur should divide by 3 on both the money raised and the valuation. That same deal would be a 1MM raise at a 2MM pre-money valuation -- as a starting point.  This rule of thumb seems to be applying to our Founder's Co-op  portfolio. One of our companies is raising 300K at 1MM pre-money: this same deal a year ago would have been a 1MM raise at 3MM pre money.  This rule of thumb applies to money raised and valuation.
The world has also changed for two other important terms:

  • liquidation preference is often 1 times with no cap.
  • ratchet: in the event the company doesn't make progress there is often a full ratchet for future downside financings.

It's easy to get in, but can you get out; Investment opportunities abound but what about exits?

We've been busy at founder's co-op looking at deals but like many investors we didn't make any new investments in Q4, 2008. We've got a couple deals in the pipeline that we're excited about and may get done in the next month or so. If we do the deals, I'll be sure to let you all know. One of the things, that's on my mind -- like many of the investors out there -- is exits in the future. Expectations amongst entrepreneurs have come down and thus, deals are increasingly investor friendly. That's good.
But the question of what happens after an investment is made and a company grows are more uncertain today than ever before.  Another way of putting it is that getting into deals is all too easy but getting money out on the back end is hard. It's impossible to have an answer to this -- and one either has faith that there will be a back end in 3 to 5 years or not.  We're keeping the faith --and hopefully, making some bets in the near term but the m&a market of the future is on our minds. 

A tip for entrepreneurs raising money: Don't make an investor wrong

I recently had a conversation with an entrepreneur about possibly investing in his company.  The entrepreneur asked for my opinion on the opportunity.  I told the entrepreneur I was interested in the business but wasn't willing to invest yet because he hadn't brought the cost of customer acquisition down enough (i.e. he needed to innovate on marketing). 
His reaction turned me off: he spent the next 5 minutes telling me why the cost of customer acquisition didn't materially matter and why I was wrong....or focused on the wrong thing. I appreciated his spirit of argument....but I really didn't want to argue with him.  (Differing opinions are welcome but argueing is a pain in the ass)
I wanted to interrupt him and tell him that my opinion was just that -- my opinion. It's neither right nor wrong....but whatever you do, don't fight with me and position me as wrong. I'll just retreat.  It's a delicate balance for an entrepreneur to make a convincing pitch in any environment and that balance has gotten harder to maintain in this environment. However, it's all the more important to make sure you guide your investors to coming to the right conclusion -- a big part of keeping that balance is making sure that you give the investor the space to have their opinion, to change their mind, and ultimately to make a choice of whether to invest or not. 

View of a Seattle angel investor

As an investor today, I have to choose between:

  1. Making an early stage bet on a company with no revenue
  2. Buying into an existing company with a revenue stream
  3. Buying shares in a publicly traded company of choice
  4. Doing nothing

What would you do?  If you're selling me on #1, your investment in terms of company, market, product and deal pricing has to be compelling enough to get me not to do the other 3 options. 
I make this list not to dishearten entrepreneurs but to give them insight into the mindset of the people their pitching.

Flat is the new up

I just had a meeting with an entrepreneur who is trying to do a financing at the same valuation as he did a year ago. Last year, he raised 1.5MM at a 1.5MM pre-money (3.0 post).  Now, he's trying to raise another 1.5MM at the 3.0MM post money so that no-one gets hurt. I told him, "flat is the new up" and I realized that I had the title for my blog post today.  I'm skeptical he'll get the deal done at that valuation but appreciate his desire to keep everyone whole.

No new cash for the next 12 months?!

I spoke with an entrepreneur today who used to be in the private equity world. He is trying to raise $3 million at a $12MM pre-money for an early stage environmental company. I told him that Founder's co-op would not be a good fit as a capital source. I asked him how the raise was going and he told me it was the toughest capital market he had ever seen.
I think he's right about the capital markets. I'm telling the companies that I'm involved in that they need to assume that they receive no more cash for the next 12 months. I don't know if it's true or not but it's a good mind set to have.

Economic reality is setting in on entrepreneurs

I've had a number conversations in the last week with early stage companies who are still holding onto too much hope with regard to the prospects for investment.  I hate to be the harbinger of bad news but getting investors -- whether that be venture capitalists or angel investors -- to part with cash this year is very unlikely. I don't want to say it's impossible, because we're looking at making a couple of investments this year. But, I'm still seeing too many entrepreneurs with expectations that are too high for the prospects of their company and the respective valuations, terms and likelihood of an investment. And, I'm still seeing investors holding onto their cash like a life raft.  Realistic expectations, perseverance, and innovation are the mind set that entrepreneurs must have toward managing their companies through this period.

To raise capital, make your company smell like money

An alternate title for this post. Use money deodorant.  I just had coffee with an entrepreneur who was bemoaning the woes of the fund raising process.  He's been unsuccessful to date in raising 600K for his internet company.  And he's dismayed and disheartened by success that others are having raising their rounds.  He asked me, what is he missing? 
I told him investors will invest -- even in this crazy economic climate -- if his deal smelled like money.  He then asked what makes a deal smell like money. Below is my list of things that make your deal smell like money (you don't need all of these things but the more the better ):

  • Proven entrepreneur -- someone who has sold a business before for 20MM or more
  • Proven technologist -- some high level geek at Google, Oracle, or Microsoft
  • A determined, hungry entrepreneur with integrity
  • An easy to understand product or business, and preferably one that is fun
  • A clear path to making money, and preferably proof on making money is even better
  • Customer traction -- the more the better, and preferably evidence of accelerating customer traction
  • The stamps of big company endorsements always helps -- as customers or partners

Learning to be an investor

I've been an entrepreneur since 1994 -- that's almost 14 years.  I'm surprised at some of the basic lessons that I'm learning as I become self educated as a seed stage investor.  Having started and run 5 companies over the past 15 years gives me lots of insight into the management of the companies that are pitching me on investment. Currently, I'm trying to figure out how exactly to apply my experience -- which is still relatively unique in the investment community -- to investing. 
The question I'm asking myself today is -- would I have invested in Twitter early on.  My answer is -- I think not.  I would have understood the entrepreneurs and gravitated toward them, and I would have understood thee messaging platform, but I would  have likely dinged the business because of its lack of a revenue engine.  This is all mute -- because I never invested nor was I asked to invest but it's all part of evolving my investment perspective.

Ideas are investor candy

One of the things I enjoy about my new role as investor is that people seek me out to tell me and sell me on their ideas.  I've always liked business ideas and my new role allows me to interact with them regularly. Ideas are like candy. They sweet and taste good but aren't particularly filling....In the same way, I love hearing ideas but when it comes to investing, I look for a team  who know a market and are executing in a real focused way. 

The funding climate for early stage companies in April 2008

I just had another meeting with an early stage entrepreneur who was commenting that raising capital seems to have gotten harder. I think that's true -- the bar has been raised.  The current economic outlook, the mortgage and financial crisis, the crashing of consumer confidence all have an affect on investors willingness to do a deal for an early stage company.  So my advice to the entrepreneur -- who is a solid guy and has a good business was to focus on getting money from customers rather than investors.  My belief is that the companies that are built during this period of time are going to be stronger and better than the companies that are built during the next growth spurt (whenever that is!).